Interest and increase are added to taxes that are overdue
This article contains guidance and notes on how the consequences of late payment should be calculated. The rules on late-penalty charges vary depending on the type of tax.
- Late-filing penalty on self-assessed tax returns
- Income taxation of corporations and joint benefits: late-filing penalty and punitive tax increase (in Finnish and Swedish only)
- Inheritance taxation: late-filing penalty and punitive tax increase
- Gift taxation: late-filing penalty and punitive tax increase.
Late-payment interest for real estate tax and individual income tax
If paid late, the following types of tax are subject to late-payment interest:
- Real estate tax (all taxpayers)
- Income tax of individual taxpayers, i.e. prepayments and back taxes (individuals, self-employed operators of a trade or business, self-employed professionals, partners of general partnerships, partners of limited partnerships, and individuals with agricultural operations including farm and forestry, and owners of forests)
Use this calculator (in Finnish and Swedish only) to figure out how much you must pay in interest.
The interest rate is officially defined for every year. For 2018, it is 7%. Its threshold amount is €3. To calculate the amount of interest owed, you must add interest separately to each amount that remains unpaid. Interest must even be added to a tax increase that may be imposed on you if you file a tax return too late.
The interest period starts on the day after the due date and ends on payment (you must include both these dates in the calculation). For purposes of calculation, each month has 30 days and the year has 360 days.
If you are late in paying your taxes, you are expected to add the interest or increase to the original amount and proceed to pay the entire sum, using the same reference information as with the original amount. The Tax Administration applies the arriving payment in the following order: we consider the late-payment interest to have been paid up first. Then we apply the rest of the sum to the overdue tax. If you receive a reminder letter because you have taxes outstanding, the amount to pay and a new due date are printed on it, containing the interest up to that date.
Late-payment interest for self-assessed taxes, corporate income tax, and inheritance and gift tax
If paid late, the following types of tax are subject to another type of late-payment interest:
- VAT, employer contributions and other self-assessed taxes (all taxpayers)
- Income tax of corporate taxpayers, i.e. prepayments, additional prepayments and back taxes (limited-liability companies, other corporate entities including foreign estates of deceased persons)
- Inheritance and gift taxes (all taxpayers)
You must add the interest to the original amount of tax and proceed to pay the entire sum, using the same reference information as with the original amount. The Tax Administration applies the arriving payment in the following order: we consider that the late-payment interest is paid up first, then we apply the rest of the sum to the overdue tax.
Interest also accrues on adjustments and on miscellaneous charges
Interest is also charged in connection with tax reassessment in cases where a taxpayer has failed to submit their tax return. In these circumstances, the Tax Administration imposes the late-payment interest when preparing its decision letter on reassessment and performs the interest calculations that are necessary. The calculation starts on the day following the first due date of back taxes, and the final interest day is the due date of the amount determined by reassessment.
If the Tax Administration’s decision on tax assessment contains miscellaneous charges in addition to the tax (known as a late-filing penalty, a punitive tax increase, a negligence penalty or “myöhästymismaksu, veronkorotus, laiminlyöntimaksu” in Finnish), you must also pay interest for the late payment of these charges.
In this case, the period for which interest must be paid begins on the day after the due date and continues until the day when the taxpayer pays up the owed amount in full.
Surtax for transfer tax
In the case of transfer tax and certain other types of taxes, the late-payment charge is called surtax. See instructions for how to pay transfer tax.
The calculations for surtax are similar to interest calculations. The rate of interest is the Reference Rate of the Bank of Finland plus 7 percentage points. However, the minimum amount is €3. Use this calculator (in Finnish and Swedish only) to figure out how much you must pay.
You must add the surtax to the original amount of tax and proceed to pay the entire sum, using the same reference information as with the original amount.
If the Tax Administration has imposed an amount of transfer tax, a decision letter is issued containing a calculation of the transfer tax, surtax, and tax increase if applicable. In this case, the Tax Administration’s calculation includes the surtax that accrues up to the relevant due date. You are expected to pay the tax and the surtax in a single payment, using the same reference information.
Interest on back taxes imposed on individual and self-employed taxpayers
If your withholding and prepayments during the tax year were not enough to cover your actual tax liability for 2017, you must pay back tax in order to cover the balance that is missing. However, you have the option of adding to the total of your prepayments by sending us a supplementary prepayment. This is an opportunity to reduce your back taxes and the interest that would accrue on them.
For the 2017 tax year, taxpayers were still able to make supplementary prepayments interest-free until January 2018. After that, starting 1 February 2018, the missing balance is subject to interest on back taxes up to the day when the first instalment of back taxes falls due, i.e. up to 3 December 2018.
The rate of interest on back taxes is officially confirmed for each year. The rate is different for different amounts of back taxes.
For tax year 2017
- the rate of interest for amounts below €10,000 is 0.5%
- for the part going over €10,000 the rate is 2%.
€20 or the total amount of interest, whichever is higher, is deducted from any interest on back taxes. In practice, you will have to pay interest on residual tax for the 2017 tax year if your back taxes exceed €4,788. The assessment decision indicates the amount of interest on back taxes you must pay. Pay it together with the back tax in a single transaction.
You can pay supplementary prepayments in respect of the 2017 tax year up to 1 October 2018. If you are paying back taxes for 2017 and your payment arrives 1 October 2018 or earlier, and you are using the bank forms you received in the letter that contained your pre-completed tax return, this payment is treated as a supplementary prepayment. When we have processed your payment you’ll receive a new decision of assessment complete with new bank forms.
As of the 2018 tax year, the payment known as the supplementary prepayment (“ennakon täydennysmaksu” in Finnish) is replaced by a new kind of prepayment, additional prepayment (“lisäennakko” in Finnish). This change will also affect the consequences of late payment. The new process is similar to the one applied on limited-liability companies and other corporate entities.
Corporate taxpayers with additional prepayments and back taxes: Late-payment interest with relief
If you are a limited-liability company or other corporate taxpayer and the prepayments you paid in the course of the tax year are not enough to cover your actual tax liability, you must pay back taxes in order to cover the missing balance. In case you want to add to the sum of your prepayments, the procedure for corporate taxpayers is to ask the Tax Administration to calculate the additional prepayment that will be needed. This is an opportunity for you to reduce both the back taxes and the interest that will accrue on them.
If you wish to pay in an amount as an additional prepayment as explained above, free of interest, the deadline for doing so is one month after the end date of the corporate entity’s fiscal year. When the deadline has passed, the Tax Administration will charge you late-payment interest with relief from the first day of the second month following the end of your fiscal year up to the date when you send us the prepayment.
In the same way, the late-payment interest with relief will be applied on your corporate entity’s back taxes. This interest is charged from the first day of the second month following the end of your fiscal year up to the due date of the back taxes. The only circumstances where you can benefit from the €20-deduction is when your standard tax assessment is completed after the end of the fiscal year. In this case, you can have the deduction of €20 from the interest on back taxes or the total amount of interest, whichever is higher.
The rate of interest is the Reference Rate of the Bank of Finland plus 2 percentage points. However, it cannot be less than 0.5%. For 2018, the rate is 2%. The exact amount of interest you must pay is displayed in MyTax and printed on the assessment decision. When making the payment, you must add the late-payment interest with relief to the additional amount to be prepaid. Then pay the sum total in a single transaction.
Please note that if you are late in sending us the payment of a back tax or an imposed additional prepayment, you must add late-payment interest to the sum total.
Further information: Tax prepayments for corporations (in Finnish and Swedish only)